The Chinese like to think of history progressing in 30-year cycles, and have even taken to using the jargon of the internet to describe it. China 1.0 was the three decades of Mao Zedong , the heady cocktail of a planned economy, a Leninist political system, and a foreign policy of spreading global revolution. China 2.0 was Deng Xiaoping’s market revolution which brought export-led growth, political repression and economic

diplomacy. But with the 18th Party Congress concluding its business, many predict that China will not only say goodbye to some of the leading players of the last decade – it will also inaugurate the beginning of a new era: China 3.0.

The year began with a series of powerful signals of change: in January, a village in Guangdong called Wukan was allowed to hold an election to oust corrupt officials suspected of selling off communal land at artificially low prices; in February, the World Bank and the National Development and Reform Commission released a report on China in 2030 calling for a new wave of market reforms; and in March the “princeling” Bo Xilai was ousted from his Chongqing power base with a warning against returning to the Cultural Revolution. These intimations of reformism are responses to a broader malaise. Since the global financial meltdown of 2008, China has been facing a triple crisis of success. China has managed to achieve each of the three goals of Deng’s era – affluence, stability, and power – but the policies that allowed China to reach them are now in danger of becoming self-defeating. China 3.0 will be defined by the quest to escape each of these three traps.

For most of the last 30 years, China’s leaders have been kept awake at night worrying about their country’s poverty and the problems of a socialist economy. But today it is China’s affluence and the problems of the market that are causing sleepless nights. China’s leadership has spent a generation obsessively focusing on economic growth at the expense of all else, and the new vested interests that have been created are resisting the economic rebalancing required for long-term development. A surge of conspicuous private consumption and vanity projects has come at the expense of investment in public goods such as pensions or affordable healthcare or public education.

On one side of the debate about how to escape from the affluence trap are economists such as Zhang Weiying, who form the core of the pro-market New Right. They pioneered the gradualist economic reforms of the 1980s and 1990s and now want the state to finish the job and privatize the rest of the economy: restart the interrupted privatization of the state sector; give the private sector equal rights to finance; and end collective ownership of land. On the other side of the debate are New Left thinkers who favor boosting wages, ending the artificial subsidies for exports, providing access to social services, reforming the hukousystem, and ending the “financial repression” of artificially low interest rates. The problem for the approaches of both the left and the right is that they run into the massive vested interests that have grown during the dizzying two decades in which crony capitalism has taken off.

How to break that is increasingly a question that impinges on politics. After the Tiananmen Square massacre and the collapse of the Soviet Union, China eschewed Western-style political reforms for fear that they could lead to the dissolution of the country. But the sociologist Sun Liping – who supervised the PhD of Xi Jinping, the next president of China – argued that the country’s obsession with stability is becoming self-defeating: “The ultimate outcome of the massive stability preservation project is in fact the intensification of social tensions.” It is true that social unrest has grown even faster than China’s market – from 9,000 riots a year in the mid nineties to 180,000 last year. That is one riot every two minutes. Privately, some scholars go even further, warning of another “Tiananmen.” A growing number of thinkers, inspired by the elections in Wukan, are calling on the party to embrace wide-ranging political reform. But others feel that only the charismatic power of a leader – combined with the political organisation of the party – can cut through the vested interests and rebuild links with an increasingly restive citizenry.

China’s third big challenge is how to deal with a surge in its global power on the back of its breakneck economic growth. For a generation Beijing’s foreign policy was guided by Deng Xiaoping’s injunction to “tao guang yang hui,” which literally means “hide its brightness and nourish obscurity.” But it is hard to sustain a low profile when your country has the second-biggest economy in the world, your military spending is growing in double-digits, and you have a physical presence in every continent. Foreign policy professionals still want to accommodate Western power, and show “modesty” and “prudence” are even more important. But they are struggling against those who argue that China now finds itself in a bi-polar world and that the only way to stop America from containing it is to revisit old doctrines such as non-alignment, non-intervention and the primacy of economics.

Incredible as it might seem to Western ears, a majority of intellectuals have started to talk of the Hu-Wen era, which delivered an average of 10 percent annual growth, as a “lost decade” because much-needed reforms were not made. They say that to prevent the country stumbling, China 3.0 will need to include changes to the status-quo as radical as the onset of communism in 1949 or the embrace of the market in 1979. But unlike during those earlier periods, today’s reformers do not have international models to guide them.

It is not just the Beijing consensus that is broken; the models of the West are also discredited. The leaders of China 3.0 find themselves in uncharted territory.

Mark Leonard is Director of the European Council on Foreign Relations and Editor of China 3.0. The views expressed are his own.